Credit for Small Employer Health Insurance Premium
For tax years 2010 through 2013, the maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.
For tax years beginning in 2014 or later, there will be changes to the credit:
The maximum credit will increase to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.
To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace.
The credit will be available to eligible employers for two consecutive taxable years.
Here’s what this means for you. If you pay $50,000 a year toward workers’ health care premiums — and if you qualify for a 15 percent credit, you save… $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $10,000 a year.
Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.
There is good news for small tax-exempt employers too. The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.
And finally, if you can benefit from the credit this year but forgot to claim it on your tax return, there’s still time to file an amended return.
Click here if you want more examples of how the credit applies in different circumstances.
Can you claim the credit?
How do you claim the credit?
If you are a small business, include the amount as part of the general business credit on your income tax return.
Don’t forget… if you are a small business employer, you may be able to carry the credit back or forward. And if you are a tax-exempt employer, you may be eligible for a refundable credit.
Versión en Español
Información acerca del Crédito Tributario por Cuidados de Salud para Pequeñas Empresas
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Small Business Health Care Tax Credit Estimator
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